IT zones lag behind expectations
03 March, 2011

Identity status for Georgian IT Zone exempting Georgian export-oriented IT companies from profit and Value Added Tax is defined and available for acquisition. But IT companies do not rush to swoop on it as yet. Neither expect they a boom of foreign investors due to the proposed taxation preferences for IT zones.
The IT zone entity status criteria entered into effect on February 15, 2011 shortly after the law on IT zones was enforced staring January

of this year. Ministry of Finances (MOF) assures that the interest for IT zone status is big and is supposed to increase gradually. But only 10 companies appealed the MOF with the request to rank them as IT zone entities as of yet. However only 5 applications were approved, 4 were turned down and one is under discussion at the moment. MOF assures that granting of IT zone status takes just 48 hours instead of 10 days acclaimed initially.
According to MOF, the law on IT zones is focused on boosting IT business in Georgia by creating market demand and attraction of foreign investments in the sector. Entrance of big IT giants is supposed to have spill-over effect and develop the sluggish IT education by training local personnel.  
But the sector pundits seem disappointed for instead of initially proposed complete zeroing taxes to IT Zone entities the preferences covered Value Added Tax (VAT) and profit tax alone. Zeroing of the income tax charging by the biggest rate of 20% that was expected to make a breakthrough in Georgian IT sector remains unchanged.
According to sector pundits, income tax makes 70-80% of companies’ expenses and exemption from it could really attract international IT fames to Georgia, but without this preference nobody is expected to rush here.
“The profit tax exemption is not crucial for me as we have little profit, that’s why we do not seek for the IT zone status” Giorgi Gordeladze, a spokesperson of Saatec, a Tbilisi-based software development company oriented on export, told Georgian Journal. “It would be better to exempt us from income tax; income tax preference is the most substantial to IT sector, salaries in IT sector increased significantly lately and there is not as cheap labor force in Georgia as in other countries like India for example. That’s why Georgia is not competitive at international market. And zeroing of income tax would be crucial to attract investors here. ”
Jarji Maare, Head of iTex International, an export-oriented software company, claims on inadequate governmental policy and insufficient support to IT sector.
“Armenian government has established a ministry of IT sector six years ago and Armenian IT companies contribute about USD 40 million to the state budget, while nobody cares for IT sector in Georgia as if it is insignificant,” he told GJ.
Figures provided by MOF seem less impressive than Armenian ones and bespeak on Georgia’s high dependence on import. GEL63.402 million worth IT technique was imported in Georgia in 2010 that is three-fold reduced compared to 2009. The software import accounted for GEL1.986 million last year while it was GEL 3.203 million in 2009. The export of software programs increased meantime: in 2010 it accounted for GEL 9 114 compared to GEL 6938 of 209.
According to Maare, one of the key problems in Georgia is absence of high-level education system. Georgian IT geeks are self-educated in fact. And irrespective this fact Maare believes that abolishment of income tax could attract big international IT companies to enter Georgia.
“I assure you if the income tax were zeroed there would have been a boom of foreign IT companies in Georgia; they would have moved their offices here and the income tax-based budgetary losses would be compensated many-fold. But if we do not offer them conditions better than in their countries why they are supposed to come here?” he said adding that he prefers not to seek for IT zone status as of yet till details of the taxation preferences  are clearer.
Irakli Tushishvili, Director Executive of Alta Software, local IT company that has already acquired IT zone status, believes exemption of IT export from profit tax is the first step undertaken by government and other positive moves will also follow.
“It gives an impetus to the companies that were not oriented on export to develop this direction. We have not been exporting our product as yet, were delaying this by tomorrow, but now this here initiative entices us to take bigger interest in export and think of it today,” Tushishvili said. He does not expect boom of foreign investors however as expected before when the IT law was supposed to zero all taxes.

Other Stories
Government closes ski resorts in Georgia over COVID-19
The season at the ski resorts of Georgia closes ahead of schedule, the Prime Minister’s spokesman, Irakli Chikovani, said at a briefing.
Georgia will export armored vehicle Didgori Warrior
A new Georgian armored vehicle Didgori, equipped with a 120mm mobile mortar module, will be exported under the agreement signed between the Military Scientific-Technical Center Delta and one of the countries of the Middle East, the Ministry of Defence said.
Korter: Reliable housing property data in Georgia
It's not a simple job to find fresh homes. But when you use the estate choice service Korter, everything becomes distinct.
Rent a car in Tbilisi –
Are you thinking of booking the best vehicles for your next trip at a very reasonable price? If yes, then this is one of the best decisions you can ever make for yourself.
Pleasant Sunday for the whole family – Renewed Sunday’s brunch at The Biltmore Tbilisi Hotel
Summer, the season of endless fun and vacations, has ended and Tbilisi has become a usually crowded city.
GEL devalues, officials show optimism though
Devaluation of the national currency has sent shockwaves among citizens in Georgia. Officials think that the trend will return to its normal frame, though.
ProCredit Bank’s 20 years of challenges and successes in Georgia and what it means to be a responsible bank
“The bank’s 20-year long presence in Georgia was marked by many challenges and success stories.
Comments on alarming GEL devaluation
The National Bank of Georgia set a new exchange rate, according to which, dollar price became GEL 2.9507 on Tuesday.
Euronews and Silknet sign an MOU to launch “Euronews Georgia”
Euronews and Silknet, Georgia’s leading telecommunications company, are announcing the signing of an MOU in view of launching Euronews Georgia, a news channel and digital platform aimed at a Georgian-speaking audience.
Green Diamond starts to hand over flats to owners as second stage of construction finishes
Second stage of construction of Green Diamond living apartments by MAQRO Construction has finished and process of hand over of flats to owners has started.
Georgian wine tasting in the US came off excellently
Georgian wine tasting in the main cities of the US, New York, Chicago, and Boston went off excellently.
The most wanted fruits from Georgia
The fruit exportation has decreased in Georgia. According to Geostat (National Statistics Office of Georgia), this year, up until May Georgia exported 25 939 300 USD worth of fruit – 6 771 300 USD less than in 2018.
Investment Plan for Europe – Additional EUR 800 million for SMEs as EIF and ProCredit double support for innovative companies
The European Investment Fund (EIF) and ProCredit Group are providing an additional EUR 800 million to innovative small and medium-sized companies (SMEs),
Everything of comfortable life in one space – Second part of construction of one of the largest apartment complexes finished in Tbilisi
Apartment in ecologically clean environment, thousands of square meters of green yard, swimming pools, places for various sports activities, treks for walking and running, commercial spaces – all these available in one space is not a fantasy.
Batumi awarded Europe's Leading Emerging Tourism Destination 2019
World Travel Awards Europe Gala Ceremony 2019 took place on the 8th of June in Madeira, Portugal.
Coca Cola to open new factory in Georgia, will hire female drivers
Coca Cola is opening new factory in Georgia in December.
World's best party supply company now on the Georgian market
The largest party supply store in Georgia - MyDay is launching as the official distributor of AMSCAN from 2019.
Live as a marketing tool and an unprecedented live stream launched by Livetag
Sharing information has become smoother and more versatile in today’s technological world. Recently, live streaming, an online streaming media has become especially popular.
Theme and program of Caspian Energy Forum Tbilisi – 2019 changed
“The 8th International Caspian Energy Forum Tbilisi – 2019, scheduled for June 21, will focus on the development of the Azerbaijan-Georgia relations in the field of economy and energy”,
Misunderstanding over Poti deep sea ports
There was misunderstanding around deep sea ports in Georgia – in Poti.
High demand for dollars or the investment decline – Why Georgian Lari depreciates
$1 equals GEL 2,7470 in the official rate set by the National Bank of Georgia (NBG).
PSP Group confirms negotiations regarding purchasing of GEO Hospitals
PSP Group confirms negotiations regarding purchasing of GEO Hospitals.
New life to be given to Dashbashi Canyon
Georgia’s Agency of Protected Areas is planning to give new life to Dashbashi Canyon in Tsalka (southeastern Georgia).
Who is constructing “Khadori 3” Hydropower Plant in Pankisi Gorge?
Clashes broke out in Pankisi Gorge, Georgia’s northeastern region between special forces and residents
Business Positive – Successful radio program from Radio Positive
Starting point of radio program Business Positive is to meet interesting people, communicate with them and deliver information that is interesting for the audience.
GEL Exchange Rate
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
April 2020
Mon Tue Wed Thu Fri Sat Sun
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30